Cautious banks prove their worth
March 12th, 2009 by Bryden Elssmann
Closing Data
| current | change | % | |
|---|---|---|---|
| Dow Jones | 6930.4 | 3.91 | 0.1% |
| NASDAQ | 1371.64 | 13.36 | 1.0% |
| S P 500 | 721.36 | 1.76 | 0.2% |
| FTSE 100 | 3693.81 | -21.42 | -0.6% |
| Nikkei 225 | 7376.12 | 321.14 | 4.6% |
| SPI Futures | 3237 | 8 | 0.2% |
| All Ords | 3,199.00 | 55.9 | 1.8% |
| Oil | 42.46 | -3.22 | -7.0% |
| Gold | 910.7 | 14.8 | 1.7% |
| Silver | 12.815 | 0.255 | 2.0% |
| Aluminium | 1455 | 9.5 | 0.7% |
| Copper | 2902 | 90 | 3.2% |
| Lead | 949 | 4 | 0.4% |
| Nickel | 10810 | 950 | 9.6% |
| Tin | 10355 | 285 | 2.8% |
| Zinc | 1120.5 | 30.5 | 2.8% |
U.S. stocks rose for a second day as JPMorgan Chase & Co. joined Citigroup Inc. in saying it was profitable in January and February, bolstering speculation that the worst of the banking crisis may be over. Banks are actually making money,” said Mark Bronzo, a money manager at Security Global Investors, which oversees $23 billion in Irvington, New York. “These stocks have been so beaten down that it wouldn’t take much for them to do better.” Despite reassurances, investors are still wary about the ultimate fate of banks laden with “toxic assets” on their balance sheet. The Dow Jones closed up 3.91 points, or 0.06 per cent, to 6930.40. The S&P 500 gained 1.76 points, or 0.24 per cent, to 721.36.
In Australia, the market is set to open positively following strength from the US. SPI Futures are up 1% suggesting the bear market rally will continue. The S&P ASX 200 Financial Index (XFJ) has rallied over almost 200 points this week.
NAB has announced it plans to slash its interim dividend by 25 per cent. NAB now joins ANZ in announcing a cut in dividend. The dividend cut comes as the market continues to weaken and banks are forced to look at ways to preserve capital and offset rising debt. On the other hand over cautious banks are proving their worth and value. Australian banks face neither the balance sheet problems nor housing market collapse seen in the UK and USA. Tier 1 capital ratios for the big four are well above 8%, compared with 4-5% in the UK, adding to the stability of the sector. When ANZ announced its dividend cut last month its share price rallied as investors welcomed the banks caution. We expect NAB to open stronger today following its announcement.
Oil has fallen sharply overnight as the US Government reported a rise in stockpile levels. Oil was down 7.4 per cent, at $US42.33 a barrel. The market is still awaiting the outcome of OPEC meeting scheduled for this weekend. The cartel has already announced drastic cuts to production levels in a further effort to stabilise price levels. The market is becoming comfortable with levels around $40-$45. We are expecting WPL, STO and OSH to open weaker today.
Finally, Gold has rallied above $US900, up $US14.80 to settle at $US910.70 an ounce. Renewed concerns over any recovery in the global economy could trigger another flight to quality in Gold. Stocks to watch are LGL and NCM.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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